A price chart is a record of every decision buyers and sellers have made. Learning to read one will not predict the future, but it will tell you what has happened, how strong the trend is, and where other market participants are likely paying attention. Open our live advanced chart in another tab and follow along.
1. Pick your time frame first
The same stock can be in an uptrend on a weekly chart and a downtrend on an hourly chart. Long-term investors typically focus on daily and weekly charts; swing traders on daily and 4-hour; day traders on minutes. Always check at least one higher time frame for context before reacting to a move on a lower one.
2. Candlesticks: four prices in one shape
Each candlestick shows the open, high, low and close (OHLC) for one period. The thick body spans open to close. It is typically green (or hollow) when the close is above the open, and red (or filled) when below. The thin wicks show the high and low.
- Long body: one side dominated the session.
- Long upper wick: buyers pushed price up but sellers drove it back down, possible rejection.
- Long lower wick: sellers pushed down but buyers stepped in, possible support.
- Doji (tiny body): indecision; open and close nearly equal.
Single candles mean little alone. They become informative at important levels and when confirmed by volume.
3. Volume: the conviction behind a move
The bars beneath the price show how many shares traded. A breakout on heavy volume suggests broad participation; the same breakout on thin volume is more likely to fail. Sudden spikes in volume usually mean news. Our screener can filter for unusual relative volume.
4. Trend: higher highs, higher lows
An uptrend is a series of higher highs and higher lows. A downtrend is lower highs and lower lows. Anything else is a range. Drawing a trend line under the rising lows (or above falling highs) makes the structure visible. A trend is considered intact until that structure breaks, for example when an uptrend makes a lower low.
5. Support and resistance
Support is a price zone where declines have repeatedly stopped because buyers stepped in. Resistance is where rallies have stalled because sellers appeared. These levels work partly because so many people watch them: traders who bought at resistance and saw a loss may sell when price returns to break even. Once resistance is broken decisively, it often becomes support, a concept called role reversal. Round numbers and prior all-time highs frequently act as these levels.
6. Moving averages
A moving average smooths price into a line showing the average over the last N periods. Two are watched especially closely on daily charts:
- 50-day moving average: the medium-term trend.
- 200-day moving average: the long-term trend. Many institutions consider a stock above its 200-day in a long-term uptrend.
When the 50-day crosses above the 200-day, it is called a golden cross; the reverse is a death cross. These are lagging signals: they confirm trends that have already begun rather than predicting new ones.
7. RSI: measuring momentum
The Relative Strength Index compares recent gains to recent losses on a 0–100 scale, usually over 14 periods. Readings above 70 are labelled overbought and below 30 oversold. In strong trends RSI can stay overbought for weeks, so it works better as a warning than a sell signal. Divergence, when price makes a new high but RSI makes a lower high, can signal fading momentum.
8. Common chart patterns
| Pattern | What it looks like | Common interpretation |
|---|---|---|
| Double top / bottom | Two failed attempts at the same high or low | Possible reversal once the middle level breaks |
| Head and shoulders | A peak, a higher peak, then a lower peak | Possible end of an uptrend |
| Flag | Sharp move, then a small sloping consolidation | Possible continuation of the prior move |
| Triangle | Converging trend lines | Volatility contraction before a breakout |
| Cup and handle | Rounded base, small pullback, breakout | Bullish continuation in growth stocks |
Patterns are probabilities, not certainties. Many fail. Their main value is defining a clear level where you are proven wrong.
9. Putting it together: a five-step chart routine
- Weekly chart: what is the long-term trend? Is price above the 200-day average?
- Daily chart: mark the nearest support and resistance zones.
- Check volume on recent big moves.
- Check RSI for extremes or divergence.
- Define your invalidation level and size the position with our position size calculator.
The limits of technical analysis
Charts reflect the past. They cannot foresee earnings surprises, regulatory changes or sudden shocks. Many investors combine charts with fundamental analysis: fundamentals for what to own, charts for when and how much.
Educational content only, not investment advice. Trading involves risk of loss.